“The Escalating Cost Crisis”

September 28, 2006 by SwizStick  
Filed under Education, Misc Logistics

 Print This Post

Leave a comment

ShopFloor.org, the National Association of Manufacturer’s blog, has a must read on the recent report issued by NAM, The Manufacturing Institute, and the Manufacturer’s Alliance/MAPI that outlines the escalating cost burden carried by U.S. manufacturers that is hurting their competitiveness. From ShopFloor.org’s post:

*Myth: US business taxes have been cut to the bone. Reality: the report shows that the United States is standing still while the rest of the world is cutting corporate taxes. The OECD average rate is now a full 10 points BELOW the U.S. rate. In our report, only Japan is higher. It telltale when even German socialists are cutting corporate tax rates but the U.S. hardly budges.
* Myth: Europe is greenest. Reality: The report looks at the costs of pollution abatement regulation and finds that this country spends more of manufacturing output on it than France, Germany or the UK. What does this mean? It could mean that those countries are more efficient regulators, gaining environmental improvements without saddling their manufacturers with extreme costs. Or it could mean the U.S.is greener.
* Myth: Energy is a disadvantage for the US. Reality: Just ten years ago, the US had a large international advantage because of our large natural gas reserves. That’s been turned into a cost–a disadvantage–in the past decade though and it is one of the saddest elements in the cost study report. That’s because we have ample natural gas resources that manufacturing needs, we are just not deploying them. So US manufacturers pay more for this fuel than counterparts in Canada, UK and elsewhere. Sad because we can remedy it easily by allowing more drilling but Congress can’t seem to get there.

You can access the full report from the linked post or click here.

I went through the report and found it very illuminating, chock full of analysis and facts that explain in convincing terms the need to improve the competitiveness of U.S. manufacturing by reducing the cost burden. Three years ago they released a report titled “How Structural Costs Imposed on U.S. Manufacturers Harm Workers and Threaten Competitiveness”. The report analyzed five components classified as “non-wage, structural costs” – corporate tax rates, employee benefits, tort costs, natural gas, and pollution abatement – and the effect these “external costs” were having on the U.S. manufacturing industry. This new report revisits the findings from three years ago and finds that costs are rising dangerously. From the foreward by John Engler:

With this new study, The Escalating Cost Crisis, we re-examine these costs and conclude the trends are headed in the wrong direction. Dramatically, dangerously so. The same external costs now add 31.7 percent to U.S. manufacturers’ production costs compared to our major trade partners.
————————————————————————–
Rising non-wage, structural costs are outside the direct control of manufacturers and they shape the attitudes, expectations, and planning of U.S. manufacturers more than any other factor. They define our ability to succeed in the increasingly competitive global marketplace.

It’s 29 pages long, but well worth the read. You may be surprised by what you find.

U.S. logistics Infrastructure – Impending crisis or smooth sailing?

2008 Ocean Contract Season

Continental Airlines to cut jobs; ground planes

Despite worldwide economic woes, China’s trade surplus increases